Stamp duty to bill to hit £7,500 for average homebuyer as official figures undercook actual house prices by £90,000

The average homebuyer will soon face a £7,500 stamp duty bill, according to a report which claims the Government is hugely underestimating property values.

The average price paid for a home has inched to within touching distance of the £250,000 tax threshold at which stamp duty trebles to three per cent, according to Land Registry quarterly figures.

Once property buyers purchase a home above this level their tax bill rockets from a maximum of £2,500 to more than £7,500 – hammering those already struggling to raise the large deposits or equity needed to get good mortgage rates.

Stamp Duty: Around 80,000 people in England and Wales, 10% of the market, could find themselves paying three times more Stamp Duty this year

The most recent quarterly Land Registry data puts the average house price in England and Wales at £249,958, massively higher than the organisation’s monthly report which delivers a lower average of £161,500.

The price gulf between the two Land Registry reports is primarily due to the monthly report not including the sale of new-build property.

The quarterly figure is now three times higher than when stepped stamp duty was introduced above £250,000 by then Chancellor Gordon Brown in 1997. Had the threshold risen in line with house price inflation it would now stand at more than £750,000.

Property investment specialist London Central Portfolio argues that the quarterly report paints a far more accurate picture of what buyers in England and Wales are paying.

This is because while the Land Registry claims its method allows an ‘apples to apples’ comparison in value changes, it also means that the overall average price actually paid for all property does not appear to be reflected.

HOW STAMP DUTY HAS SOARED:

Stamp duty is charged on the entire purchase price of a property.

Before Gordon Brown's time in charge of the nation's finances stamp duty was a flat rate of one per cent above £60,000.

This was changed to 1.5 per cent above
£250,000 in 1997 and two per cent above £500,000 and then three per cent
above £250,000 and four per cent above £500,000 in 2000.

George Osborne raised stamp duty to five per cent above £1million in 2011 and seven per cent above £2million in 2012.

If stamp duty thresholds had risen in
line with Land Registry quarterly average price inflation since 1997,
from £79,242 to £249,958, they would be:

The house price reports produced by
major mortgage lenders Halifax and Nationwide also put the average
property at £163,845 and £162,262, respectively. But these are based
on their own mortgage data, rather than the transaction prices lodged
by the Land Registry.

In
its stamp duty report LCP called on the Government to urgently
re-evaluate the one per cent stamp duty ceiling, which has remained
unchanged for over 15 years.

The report said: ‘For any buyer, finding an additional £5,000 is a big ask, especially in the current climate, and for first time buyers, it could be the difference between renting and owning.

Naomi Heaton, chief executive of LCP said: ‘The Government should not continue edging up stamp duty percentages, as they have over the last 16 years, without taking into account rising property prices, inflation or the impact on transactions, which have fallen by 33 per cent since 1997.’

She added that the average price paid rising above an unmoved £250,000 threshold would be a further blow to ‘Generation Rent’ for whom the average size of a deposit is now £67,488, almost eight times the average of £8,716 paid in 1997 when stepped stamp duty bands were first introduced.

Despite a Conservative election pledge to waive stamp duty for all first-time buyers below £250,000 and talk of the tax’s burden on homebuyers, the Coalition has actually removed the concession which had been introduced after the policy was nabbed by the outgoing Labour government.

Chancellor George Osborne has also increased stamp duty by one per cent to five per cent for homes above £1million and introduced a new seven per cent charge for properties costing more than £2million.